For years, HDFC Bank was the stock every institutional investor wanted to own. So was HDFC Ltd. The HDFC franchise was considered almost untouchable—synonymous with trust, governance, consistency and compounding.
It was sold to the market as a transformational and strategic combination. But more than three years later, an uncomfortable question remains: was the merger really strategic, or was it simply inevitable?
The merger eventually happened after Aditya Puri’s retirement, with Deepak Parekh playing a pivotal role in getting the transaction through. The integration happened, and in many respects it was successful. But the market soon discovered that integration was the easy part.
Growth was the hard part.
Sashidhar Jagdishan inherited the enormous task of taking the merged institution forward. While the integration was substantial, growth began to disappoint the Street. And that changed the investment narrative.
The HDFC Bank that investors had historically owned for its superior and predictable growth suddenly looked like a bank struggling to convert its enormous scale into commensurate growth.
That has been the real story of HDFC Bank over the last few years. Not a lack of size. Not a lack of liquidity. Not a lack of investor interest.
A lack of growth momentum.
There is another interesting dimension to the HDFC Bank story. Both HDFC Ltd. and HDFC Bank were among the most widely owned institutional stocks in India. They were index heavyweights, highly liquid and deeply embedded in institutional portfolios.
For many investors, therefore, selling was not necessarily an easy option. You could dislike the returns. You could question the growth. But walking away from one of India’s most important financial stocks was difficult.
The numbers tell an interesting story. Foreign ownership in HDFC Bank stood at 39.46% in June 2021. Five years later, at the end of June 2026, it stood at 39.6%. Yet the number of foreign investors holding the stock rose from 1,325 to 2,065.
The ownership base has expanded, but the foreign ownership percentage has barely moved.
That tells you something about the stock’s institutional status.
HDFC Bank remains too important to ignore—even when it becomes difficult to love.
The recent governance concerns raised by former Chairman Atanu Chakraborty have added another layer of uncertainty. The allegations and concerns need to be viewed carefully and remain subject to the appropriate processes. But there is no denying that the episode has accelerated a management transition at one of India’s most systemically important financial institutions.
Ironically, that could become an opportunity.
Because HDFC Bank now has a chance to reset.
The Street is looking at two obvious options. An internal candidate could provide continuity, minimise disruption and preserve institutional knowledge. It could give the bank time to stabilise. But it could also prove to be a short-term solution.
The second option is an external candidate—an experienced and credible Indian or multinational banker who can challenge existing assumptions and bring a fresh growth agenda. The advantage would be a clean break. The disadvantage is that an outsider would need time to understand the organisation, the balance sheet and the post-merger architecture.
There is, however, a third possibility: the regulator.
HDFC Bank is not just another private-sector bank. It is a systemically important financial institution. For the RBI, therefore, stability comes before everything else. The regulator’s priority cannot simply be to find the most aggressive growth-oriented banker available. It has to ensure continuity, governance and financial stability.
That is why Rajiv Kumar’s role becomes important. The former Secretary of the Department of Financial Services has been approved as part-time Chairman of HDFC Bank and part of the Nomination and Remuneration Committee. Along with the RBI, he is likely to play a critical role in navigating the succession process.
The NRC itself has significant institutional experience, with Harsh Kumar Bhanwala, MD Ranganath, Sandeep Parekh and Rajiv Kumar among its members.
The machinery for managing the transition exists.
The bigger question is: what does HDFC Bank want to become?
The next CEO has three jobs: stability, growth and confidence.
First, stability. The bank needs to remove uncertainty, establish clarity around leadership and governance, and reassure stakeholders that the transition will not disrupt the franchise.
Second, growth. This is the big one.
HDFC Bank cannot use its size as an excuse for slower growth. It has one of India’s strongest banking franchises, a formidable distribution network, enormous customer reach and a powerful brand. The Street wants to see those advantages reflected in the numbers.
And then there is market confidence.
Investors need to believe that the bank has a clear strategy, an independent board, credible succession planning and a management team capable of delivering sustainable growth.
This is where the current transition could become transformative.
For years, HDFC Bank has operated in the enormous shadow of the HDFC legacy. That legacy created the trust. It created the brand. It created the institutional ownership.
But legacy can also become a constraint.
The merged bank now needs to establish its own identity, its own strategy, its own culture and its own leadership.
The HDFC Bank of tomorrow cannot simply be an extension of HDFC Ltd. or a continuation of the Deepak Parekh era.
There is a view among some senior private-sector investors that the bank could effectively operate like a PSU for the next few years—a period of stability and regulatory oversight until a long-term CEO is firmly in place.
That may be acceptable as a transition strategy.
But it cannot become the business strategy.
Because India’s largest private-sector bank cannot spend the next few years simply protecting its balance sheet and managing its legacy. It has to grow. It has to regain investor confidence. And it has to demonstrate that the enormous scale created by the merger can finally translate into superior shareholder returns.
So the real question isn’t who replaces Sashidhar Jagdishan.
The real question is whether the next CEO will finally have the freedom to build HDFC Bank without the shadows of the past.
The board has an opportunity. The RBI has a responsibility. And the next CEO has a mandate.
HDFC Bank needs a fresh start.
And perhaps, after years of living in the shadows, it is finally time for HDFC Bank to come into its own.
